Fuel prices are expected to rise in the wake of the weekend attack on Saudi Arabian oil facilities, potentially further adding to already higher farm input costs.
The attacks on Saturday hindered the production of approximately 5.7 million barrels of oil per day. On Monday morning, crude oil prices were up by about 10% at about US$61/barrel. (However, prices were back below that level late Tuesday morning).
"It's a trickle-down effect," explained Allison Mac, a petroleum analyst at Gas Buddy. "Prices are going to increase very steadily over the next week or two."
All told, analysts expect gasoline prices to increase by between five and 12 cents/litre over the next two weeks. Meanwhile, some are predicting a 5- to 6-cent/litre increase in diesel prices as early as this week. Machinery fuel expenses for Canadian farmers were already up more than 18% in 2018, following a 9.3% hike in 2017, according to Statistics Canada. The increase in fuel costs helped to push total 2018 Canadian farm operating expenses up 6.5% to $50.6 billion - the largest percentage increase since 2012.
However, the good news is fuel prices won't increase as dramatically as they may have if the attack occurred in the middle of summer, when North American fuel consumption is at its peak.
"If this happened when demand was much higher, we'd see a sharper increase in prices," Mac said. "But that's not the case. If this attack didn't happen, prices would be going down right now."
As the largest oil-producing nation in the world, the eventual return to full production for Saudi Arabia should get oil prices pointed lower again, Mac added.
Source: DePutter Publishing Ltd.
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